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Welsh Government: Tax-varying Powers

Volume 741: debated on Tuesday 27 November 2012


Asked by

To ask Her Majesty’s Government whether they will take steps to enable the Welsh Government to have greater tax-varying and borrowing powers.

My Lords, the Government established the Silk commission to look at the case for devolving fiscal powers to Wales, and the commission reported its findings last Monday. The Government are very grateful for the expertise and rigour that the commission has brought to this important work. We will now carefully consider its recommendations and assess whether they are right for Wales and for the UK as a whole. The Government will respond to the report in due course.

My Lords, I welcome the noble Baroness to the Dispatch Box to answer questions in this way, not least because not so long ago she was asking exactly the same questions as I am asking today. Does she accept that the Welsh Government have no borrowing powers at present other than to cover temporary revenue shortfalls—a power that has never been used—or residual WDA powers, which are offset against the DEL budget and therefore provide no additional benefit? Now that the Silk report has come forward, as the noble Baroness mentioned, unanimously recommending that the Welsh Government should have new powers to borrow to fund capital investment over and above the DEL budget, as well as powers to issue bonds, can she give an undertaking that the Government will quickly move to provide these powers for the Welsh Government?

The noble Lord will appreciate that, as the report was published only last week, it is very early to make decisions. I can make no firm comments about the outcome of the process that we are going through at the moment. However, on borrowing, it is important to recognise that in October a joint announcement by the Secretary of State at the Wales Office, the Welsh Government and the Chief Secretary to the Treasury acknowledged that in principle the Government agree to borrowing powers for the Welsh Assembly, and we anticipate the potential of the Welsh Assembly having the right to raise and levy taxes in order to offset those borrowing powers.

My Lords, in the event that the Government decided to make new powers available to Wales, would this constitute a legal precedent as far as the governance of Northern Ireland is concerned?

It is important to bear in mind that the Government look at each of the devolved Assemblies and Parliaments and balances one against the other. They each have individual circumstances, individual rights and a different devolution settlement from the other devolved nations of the UK.

My Lords, the Silk commission admirably proposed a valuable extension of devolution by linking representation and taxation. Nevertheless, is not the Welsh Labour Party correct in saying that we cannot properly resolve these matters until there is fair funding for the Welsh Government, which means the abolition of the Barnett formula?

I draw the noble Lord back to my previous answer which related to the statement in October from the two Governments. That made it clear that in relation to the Barnett formula there was an agreement between the two that, if convergence were to start to occur again, there would be discussions with a view to establishing a mechanism to ensure a fair system for Wales.

My Lords, I congratulate the Minister on her appointment and indeed, the Government on their enlightened approach to the issue of borrowing by the Cardiff parliament. Is it not the case that it would be indeed strange if a national parliament did not have borrowing powers that are enjoyed by the most menial of local authorities? Does the Minister agree that in light of the fresh and energetic dynamism that has been created for devolution in consequence of the referendum of March last year and now, of course, by the Silk report, it would be absurd if these powers were not to be given to the land and nation of Wales?

My Lords, the agreement in October established the principle that borrowing powers could be given to the Welsh Assembly and that we should move towards those with all possible speed. I acknowledge, as the noble Lord has said, that it is completely out of line with the international situation for a legislature to have no powers of this sort. I am very hopeful that the report will be looked at in detail with all due speed, in a timely manner. It is important for the House to note that the Government have made it clear that we want to set in train issues that follow from Part I of the Silk report before the publication of Part II.

My Lords, first, I very much welcome an old friend to her position as Minister for Welsh affairs in this House. With all the changes that we are seeing in relationships within the UK—some constitutional and others possibly economic—is it not time for the Government to establish a working group of all four nations to discuss the problems that might arise and to prepare for them, without having to rush in when the time comes without thinking them through thoroughly?

I thank the noble Lord for his comments. However, now is not the time to take a comprehensive look at devolution in the round for all the nations simply because measures are in place in each of the three nations in terms of the development and progress of devolution. We therefore have to wait for those current developments to settle down before we look at devolution as a whole outcome.

My Lords, the Minister will know that the Silk commission’s recommendations included changes to taxation that would have implications extending beyond Wales and having consequences for the whole of the United Kingdom. Does she agree that Members from all parts of the United Kingdom in both Houses should be able to debate the report in full? Can she give some idea when the Government will respond to the report? I know she said earlier that it would be in due course.

It is important to bear in mind that there were 33 recommendations in the report. That very complex set of recommendations was presented to us as a package; nevertheless, there is a series of different strands associated with them. Of course, as the noble Baroness rightly points out, they have implications well beyond the borders of Wales. Some of the recommendations could be implemented relatively quickly and without legislation, whereas others would require substantial amendments to the Government of Wales Act or legislation introduced by the Treasury. However, I can say that the Wales Office and the Government are committed to dealing with this with all due speed, but in a timely manner so that we give due and serious consideration to every recommendation.